The economy of Mongolia has traditionally been based on agriculture and livestock.

Mongolia Mongolia; Mongolian script: , , ; lit. "Mongol Nation" or "State of Mongolia" () is a landlocked country in East Asia, bordered by Russia to the north and China to the south. It covers an area of , with a population of just 3.3 million ...

also has extensive

mineral In geology and mineralogy, a mineral or mineral species is, broadly speaking, a solid chemical compound with a fairly well-defined chemical composition and a specific crystal structure that occurs naturally in pure form.John P. Rafferty, ed. (2 ...

deposits:

copper Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pink ...

coal Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal is formed when ...

molybdenum Molybdenum is a chemical element with the symbol Mo and atomic number 42 which is located in period 5 and group 6. The name is from Neo-Latin ''molybdaenum'', which is based on Ancient Greek ', meaning lead, since its ores were confused with lead ...

, tin,

tungsten Tungsten, or wolfram, is a chemical element with the symbol W and atomic number 74. Tungsten is a rare metal found naturally on Earth almost exclusively as compounds with other elements. It was identified as a new element in 1781 and first isol ...

, and

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...

account for a large part of industrial production.

Soviet The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...

assistance, at its height one-third of

Gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is of ...

(GDP), disappeared almost overnight in 1990–91, in the time of the

collapse of the Soviet Union The dissolution of the Soviet Union, also negatively connoted as rus, Разва́л Сове́тского Сою́за, r=Razvál Sovétskogo Soyúza, ''Ruining of the Soviet Union''. was the process of internal disintegration within the Sov ...

. Mongolia was driven into deep

recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...

Economic growth Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate o ...

picked up in 1997–99 after stalling in 1996 due to a series of

natural disaster A natural disaster is "the negative impact following an actual occurrence of natural hazard in the event that it significantly harms a community". A natural disaster can cause loss of life or damage property, and typically leaves some econ ...

s and increases in world prices of

and cashmere. Public revenues and exports collapsed in 1998 and 1999 due to the repercussions of the

Asian financial crisis The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998– ...

. In August and September 1999, the economy suffered from a temporary Russian ban on exports of oil and oil products. Mongolia joined the

World Trade Organization The World Trade Organization (WTO) is an intergovernmental organization that regulates and facilitates international trade. With effective cooperation in the United Nations System, governments use the organization to establish, revise, and ...

(WTO) in 1997. The international donor community pledged over $300 million per year in the last Consultative Group Meeting, held in

Ulaanbaatar Ulaanbaatar (; mn, Улаанбаатар, , "Red Hero"), previously anglicized as Ulan Bator, is the capital and most populous city of Mongolia. It is the coldest capital city in the world, on average. The municipality is located in north ce ...

in June 1999. Recently, the Mongolian economy has grown at a fast pace due to an increase in mining and Mongolia attained a GDP growth rate of 11.7% in 2013. However, because much of this growth is export-based, Mongolia is suffering from the global slowdown in mining caused by decreased growth in China.

Economic history

Socialist era

The rapid political changes of 1990–91 marked the beginning of Mongolia's efforts to develop a

market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...

, but these efforts have been complicated and disrupted by the dissolution and continuing deterioration of the economy of the former

Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, it was nominally a federal union of fifteen nationa ...

. Prior to 1991, 80% of Mongolia's trade was with the

former Soviet Union The post-Soviet states, also known as the former Soviet Union (FSU), the former Soviet Republics and in Russia as the near abroad (russian: links=no, ближнее зарубежье, blizhneye zarubezhye), are the 15 sovereign states that wer ...

, and 15% was with other

Council for Mutual Economic Assistance The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along wit ...

(CMEA) countries. Mongolia was heavily dependent upon the former Soviet Union for fuel, medicine, and spare parts for its factories and power plants. The former Soviet Union served as the primary market for Mongolian industry. In the 1980s, Mongolia's industrial sector became increasingly important. By 1989, it accounted for an estimated 34% of material products, compared to 18% from

agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people ...

. However, minerals, animals, and animal-derived products still constitute a large proportion of the country's exports. Principal imports included machinery,

petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...

, cloth, and building materials. In the late 1980s, the government began to improve links with non-

communist Communism (from Latin la, communis, lit=common, universal, label=none) is a far-left sociopolitical, philosophical, and economic ideology and current within the socialist movement whose goal is the establishment of a communist society, ...

Asia Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of Eurasia, which shares the continental landmass of Afro-Eurasia with Africa. Asia covers an are ...

and the West, and tourism in Mongolia developed. As of 1 January 1991, Mongolia and the former Soviet Union agreed to conduct bilateral trade in

hard currency In macroeconomics, hard currency, safe-haven currency, or strong currency is any globally traded currency that serves as a reliable and stable store of value. Factors contributing to a currency's ''hard'' status might include the stability and ...

at world prices. Despite its external trade difficulties, Mongolia has continued to press ahead with reform.

Privatization Privatization (also privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation when ...

of small shops and enterprises has largely been completed in the 1990s, and most prices have been freed. Privatization of large state enterprises has begun.

Tax reform Tax reform is the process of changing the way taxes are collected or managed by the government and is usually undertaken to improve tax administration or to provide economic or social benefits. Tax reform can include reducing the level of taxati ...

s also have begun, and the barter and official exchange rates were unified in late 1991.

Transition to a market economy

Between 1990 and 1993, Mongolia suffered triple-digit

inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduct ...

, rising

unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the refe ...

, shortages of basic goods, and food rationing. During that period, economic output contracted by one-third. As market reforms and private enterprise took hold, economic growth began again in 1994–95. Unfortunately, since this growth was fueled in part by over-allocation of bank credit, especially to the remaining state-owned enterprises, economic growth was accompanied by a severe weakening of the banking sector. GDP grew by about 6% in 1995, thanks to largely to a boom in copper prices. Average real economic growth leveled off to about 3.5% in 1996–99 due to the

, the

1998 Russian financial crisis The Russian financial crisis (also called the ruble crisis or the Russian flu) began in Russia on 17 August 1998. It resulted in the Russian government and the Russian Central Bank devaluing the ruble and defaulting on its debt. The crisis had ...

, and worsening commodity prices, especially copper and gold. Mongolia's

gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is of ...

(GDP) growth fell from 3.2% in 1999 to 1.3% in 2000. The decline can be attributed to the loss of 2.4 million livestock in bad weather and natural disasters in 2000. Prospects for development outside the traditional reliance on nomadic, livestock-based agriculture are constrained by Mongolia's landlocked location and lack of basic

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...

. Since 1990, more than 1,500 foreign companies from 61 countries have invested a total of $338.3 million in Mongolia. By 2003 private companies made up 70% of Mongolian GDP and 80% of exports. Until recently, there have been a very few restrictions on foreign investments during most of Mongolia's post-socialist period. Consequently, mining industry's contribution to FDI increased to almost 25% in 1999 from zero in 1990.

Economic development present day

Mongolia's reliance on trade with China meant that the worldwide financial crisis hit hard, severely stunting the growth of its economy. With the sharp decrease in metal prices, especially copper (down 65% from July 2008-February 2009), exports of its raw materials withered and by 2009 the

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, ...

MSE Top-20 registered an all-time low since its dramatic spike in mid-2007. Just as the economy started to recover, Mongolia was hit by a

Zud A zud, dzud ( mn, зуд) of dzhut, zhut, djut, jut ( kz, жұт, ky, жут, russian: джут) is a disaster in steppe, semi-desert and desert regions in Mongolia and Central Asia in which large numbers of livestock die, primarily due to starva ...

over the winter period of 2009–2010, causing many livestock to perish and thus severely affecting cashmere production which accounts for a further 7% of the country's export revenues. According to the World Bank and International Monetary Fund estimates, real GDP growth reduced from 8% to 2.7% in 2009, and exports shrunk 26% from $2.5Bn to $1.9Bn before a promisingly steady increase up until 2008. Because of this, it was projected that between 20,000 and 40,000 fewer Mongolians (0.7% and 1.4% of the population respectively) will be lifted out of

poverty Poverty is the state of having few material possessions or little income. Poverty can have diverse

, than would have been the case without the global financial crisis. In late 2009 and the beginning of 2010, however, the market has begun to recover once again. Having identified and learnt from its previous economic instabilities, legislative reform and a tightened fiscal policy promises to guide the country onwards and upwards. In February 2010, foreign assets were recorded at USD1,569,449 million. New trade agreements are being formed and foreign investors are keeping a close eye on the " Asian Wolf". Mining is the principal industrial activity in Mongolia, making up 30% of all Mongolian industry. Another important industry is the production of cashmere. Mongolia is the world's second largest producer of cashmere, with the main company, Gobi Cashmere, accounting for 21% of world cashmere production as of 2006. Total export in 2019 was US$7.6 billion. The 2022 economic growth is expected to be one percent and international institutions anticipate the economy to speed up by at least six percent in 2023 from expanded commodity exports. A significant commodity export boom is expected starting from 2023 wit
new coal rail networks
to China coming online and increased copper production from

Rio Tinto Rio Tinto, meaning "red river", may refer to: Businesses * Rio Tinto (corporation), an Anglo-Australian multinational mining and resources corporation ** Rio Tinto Alcan, based in Canada ** Rio Tinto Borax in America *** Rio Tinto Borax Mine, ...

’s underground mine

Oyu Tolgoi The Oyu Tolgoi mine, also ( mn, Оюутолгой, ; "Turquoise Hill"), is a combined open pit and underground mining project in Khanbogd sum within the south Gobi Desert, approximately east of the Ömnögovi Province capital Dalanzadg ...

in southern Mongolia.

The Wolf Economy

The term was coined by Ganhuyag Chuluun Hutagt and subsequently popularized by Renaissance Capital in their report "Mongolia: "Blue-sky opportunity". They state that Mongolia is set to become the new Asian tiger, or "Mongolian wolf" as they prefer to call it, and predict "unstoppable" economic growth. With the recent developments in the mining industry and foreign interest increasing at an astonishing rate, it is claimed that the 'Wolf Economy' looks ready to pounce. The term's aggressive title mirrors the country's attitude in the capital markets, and with newfound mineral prospects it has the chance to retain its title as one of the world's fastest growing economies.

Banks

The banking sector is highly concentrated, with five banks controlling about 80% of financial assets as of 2015:Aaron Batten, Poullang Doung, Enerelt Enkhbold, Gemma Estrada, Jan Hansen, George Luarsabishvili, Md. Goland Mortaza, and Donghyun Park, 2015
The Financial Systems of Financially Less Developed Asian Economies: Key Features and Reform Priorities
ADB Economics Working Paper Series No. 450 Shares of Mongolia’s five largest domestic banks are to be offered to the public for the first time on the soon-to-be partially privatized Mongolian Stock Exchange.

Commercial banks

* KhasBank - KhasBank is a community development bank and microfinance institution headquartered in Ulaanbaatar, with a nationwide network of 100 offices and 1309 staff as of June 2012. * Khan Bank - Khan Bank has its central office in Ulaanbaatar, where 5 branches are located. It has 24 regional branch offices throughout the country, each of which supervises an additional 15 to 25 smaller branches in its area, totaling 512. * Golomt Bank - Golomt Bank started in 1995 and now manages around 23% of the assets in the domestic banking system. *

Trade and Development Bank The Trade and Development Bank (TDB), formerly the PTA Bank, is a trade and development financial institution operating in eastern and southern Africa. TDB is the financial arm of the Common Market for Eastern and Southern Africa (COMESA), altho ...

- TDB was formed in 1990 and is thus the oldest bank in Mongolia. It has a network of 28 branches and settlement centers, 60 ATMs, 1300 POS terminals, and

Internet The Internet (or internet) is the global system of interconnected computer networks that uses the Internet protocol suite (TCP/IP) to communicate between networks and devices. It is a '' network of networks'' that consists of private, p ...

SMS Short Message/Messaging Service, commonly abbreviated as SMS, is a text messaging service component of most telephone, Internet and mobile device systems. It uses standardized communication protocols that let mobile devices exchange short text ...

banking throughout the country. Foreign banks like ING are breaking into the market. In terms of access to credit, Mongolia ranked 61st out of 189 economies in accordance with 2015 Ease of Doing Business survey. However, Mongolia had one of the highest banking branch penetration rates in the world at 1 bank branch per 15,257 residents as of May 2015.

Investment banks

With a strengthening capital market environment, many foreign and local investment institutions have begun to establish themselves in Mongolia. The most prominent local agencies include
TDB Capital

Eurasia Capital
Monet Investment Bank, BDSec
MICC
, an
Frontier Securities

Environment

As a result of rapid

urbanization Urbanization (or urbanisation) refers to the population shift from rural to urban areas, the corresponding decrease in the proportion of people living in rural areas, and the ways in which societies adapt to this change. It is predominantly th ...

and industrial growth policies under the communist regime, Mongolia's deteriorating environment has become a major concern. The burning of soft coal coupled with thousands of factories in Ulaanbaatar and a sharp increase in individual motorization has resulted in severe

air pollution Air pollution is the contamination of air due to the presence of substances in the atmosphere that are harmful to the health of humans and other living beings, or cause damage to the climate or to materials. There are many different type ...

Deforestation Deforestation or forest clearance is the removal of a forest or stand of trees from land that is then converted to non-forest use. Deforestation can involve conversion of forest land to farms, ranches, or urban use. The most concentrated ...

, overgrazed

pasture Pasture (from the Latin ''pastus'', past participle of ''pascere'', "to feed") is land used for grazing. Pasture lands in the narrow sense are enclosed tracts of farmland, grazed by domesticated livestock, such as horses, cattle, sheep, or sw ...

s, and, less recently, efforts to increase grain and hay production by plowing up more virgin land have increased

soil erosion Soil erosion is the denudation or wearing away of the upper layer of soil. It is a form of soil degradation. This natural process is caused by the dynamic activity of erosive agents, that is, water, ice (glaciers), snow, air (wind), plants, a ...

from wind and rain.

Other statistics

The following table shows the main economic indicators in 1990–2017. Household income or consumption by percentage share: * ''lowest 10%:'' 3.5% * ''highest 10%:'' 35% (2005) Distribution of family income - Gini index: 40 (2000) Agriculture - products:

wheat Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologi ...

barley Barley (''Hordeum vulgare''), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains, particularly in Eurasia as early as 10,000 years ago. Globally 70% of barley p ...

, vegetables, forage crops,

sheep Sheep or domestic sheep (''Ovis aries'') are domesticated, ruminant mammals typically kept as livestock. Although the term ''sheep'' can apply to other species in the genus '' Ovis'', in everyday usage it almost always refers to domesticate ...

goat The goat or domestic goat (''Capra hircus'') is a domesticated species of goat-antelope typically kept as livestock. It was domesticated from the wild goat (''C. aegagrus'') of Southwest Asia and Eastern Europe. The goat is a member of the a ...

cattle Cattle (''Bos taurus'') are large, domesticated, cloven-hooved, herbivores. They are a prominent modern member of the subfamily Bovinae and the most widespread species of the genus '' Bos''. Adult females are referred to as cows and adult ...

camel A camel (from: la, camelus and grc-gre, κάμηλος (''kamēlos'') from Hebrew or Phoenician: גָמָל ''gāmāl''.) is an even-toed ungulate in the genus ''Camelus'' that bears distinctive fatty deposits known as "humps" on its back. ...

s, horses Industries: construction and construction materials; mining (

fluorspar Fluorite (also called fluorspar) is the mineral form of calcium fluoride, CaF2. It belongs to the halide minerals. It crystallizes in isometric cubic habit, although octahedral and more complex isometric forms are not uncommon. The Mohs sca ...

, and

); food and beverages; processing of animal products, cashmere wool and natural fiber manufacturing Industrial production growth rate: 6% (2010 est.) Electricity: * ''production:'' 3.43 TWh (2006 est.) * ''consumption:'' 2.94 TWh (2006 est.) * ''exports:'' 15.95 GWh (2006 est.) * ''imports:'' 125 GWh (2006 est.) Electricity - production by source: * ''fossil fuel:'' 80% * ''hydro:'' 0% * ''other:'' 20% (2011) * ''nuclear:'' 0% Oil: * ''production:'' (2006 est.) * ''consumption:'' (2006 est.) * ''exports:'' (2006 est.) * ''imports:'' (2006 est.) Exports - commodities: copper, apparel, livestock, animal products, cashmere wool, hides, fluorspar, other nonferrous metals Imports - commodities: machinery and equipment, fuel, cars, food products, industrial consumer goods, chemicals, building materials,

sugar Sugar is the generic name for sweet-tasting, soluble carbohydrates, many of which are used in food. Simple sugars, also called monosaccharides, include glucose, fructose, and galactose. Compound sugars, also called disaccharides or do ...

, tea Exchange rates: tögrögs/ tugriks per US dollar: 1890 (2014), 1396 (2012), 1,420 (2009), 1,179.6 (2006), 1,205 (2005), 1,187.17 (2004), 1,171 (2003), 1,110.31 (2002), 1,097.7 (2001), 1,076.67 (2000)

References

External links

*
Official site of the Ministry of Finance
*
Official government site of the Bank of Mongolia - the central bank

Mongolia

CIA World Factbook ''The World Factbook'', also known as the ''CIA World Factbook'', is a reference resource produced by the Central Intelligence Agency (CIA) with almanac-style information about the countries of the world. The official print version is available ...

{{Commons, Economy of Mongolia Economics in developing countries